Arkansas Energy Report: Severance tax revenue falls, natgas rises as top U.S. electricity producer

Editor’s note: The Arkansas Energy Report is produced monthly and is sponsored by the Arkansas State Chamber of Commerce/Associated Industries of Arkansas, and MISO (Midcontinent Independent System Operator). Talk Business & Politics makes every effort to use information current at time of posting.
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Arkansas’ rig count remained at zero through the first four months of 2016 as Southwestern Energy and other Fayetteville Shale drillers tried to stay afloat as scant drilling activity is making it hard for oil and gas companies to generate capital.

However, it’s not all bleak for the natural gas sector. The amount of U.S. electricity produced by coal in February 2016 – the most recent federal data available – fell 27% compared to February 2015, while natural gas produced electricity rose 7.7% and wind power was up 35.1%.

U.S. Energy Information Administration reporting for February (released April 28), shows that coal generated 92,900 thousand megawatt hours during the month, well below the 127,152 thousand megawatt hours in February 2016. The reduction is another clear signal of efforts by the Obama Administration to reduce the use of coal in power production.

The reduction put natural gas in the top spot with respect to electric power production, generating 98,368 thousand megawatt hours in February compared to 91,357 thousand megawatt hours in February 2015.

ARKANSAS SHALE PLAY ACTIVITY
Arkansas’ rig count dwindled to one in the last week of December after Southwestern announced it was taking its final two rigs offline until natural gas prices turned around. The number of drilling rigs in Arkansas peak at 60 on July 11, 2008, when Fayetteville Shale development was in full swing, Baker Hughes statistics show.

However, the Arkansas shale play played a major role in keeping Southwestern Energy above water with continued output from wells that were put into production before the Houston-based oil and gas company halted its drilling operations at the end of 2016.

According to Southwestern Energy’s first quarter earnings report, in which the former Fayetteville-based energy company reported a loss of $1.13 billion, net production totaled 103 billion cubic feet (Bcf) from the Arkansas play.

According to the Haynes and Boone Oil Patch Bankruptcy Monitor, released April 16, there are now 63 North American oil and gas producers that have filed for bankruptcy since the beginning of 2015, up from 51 in January. These bankruptcies, including Chapter 7, Chapter 11, Chapter 15, and Canadian cases, involve approximately $22.5 billion in cumulative secured and unsecured debt.

OTHER ENERGY NOTES
• Arkansas motorists are paying on average about $1.98 per gallon, up seven cents from a week ago (end of April). Still, pump prices in the Natural State are 37 cents below year ago levels, when drivers were paying $2.35 per gasoline for regular unleaded, AAA data shows.

• At the end of March, severance tax collections in Arkansas were just over $27 million. At that same rate, which is an average of $3 million in revenue per month, the state would close the fiscal year that ends June 30, 2016 with only $36 million in revenue from marketed natural gas sales. Severance tax revenue rose slightly to $78.6 million in fiscal 2015, compared to collections of $77.3 million in fiscal 2014, state revenue data shows.

• Nuclear power, the third largest sector for electricity production, generated 65,638 thousand megawatt hours in February, up 3.4% compared to February 2015.

• Total electricity produced in February was 314,079 thousand megawatt hours, down 6.4% compared to February 2015.

Link to this PDF for the complete Arkansas Energy Report.